Settlement Agreements
A Settlement Agreement is a legally binding agreement between you and an employee, which sets out the exit terms you have both agreed to terminate the employee’s contract of employment. They are required when an employer wishes to dismiss an employee without following the right procedures, or without having a fair reason for dismissal. The employee receives a specified amount of severance pay in return for their agreement that they will not pursue any future legal claims against the company.
This is one of the most effective ways to end an employment relationship, with the certainty that there should be no Employment Tribunal claims.
Our experts can help you negotiate and draft the terms of a Settlement Agreement, as well as assisting you in facilitating a confidential, amicable and speedy exit. With a successful Settlement Agreement, you can maximise what you want to achieve from the exit in a professional and legal manner, while minimising disruption to your business.
Restructuring and Exits:
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How Loch Law can help
As Settlement Agreements are governed by legislation under the Employment Rights Act 1996, you should be aware of the various protections for your employees under UK law. Taking legal advice from a settlement agreement lawyer at an early stage can save your company thousands of pounds.
It’s vital that you seek professional advice before making decisions that could bring about a claim against you or your company.
Here at Loch Associates Group, our experienced solicitors are specialists in employment law, working with you to deal with any employee disputes quickly and efficiently.
We can help to:
- Advise the strategy to successfully negotiate the exit and agree the terms you want in the Settlement Agreement;
- Prepare the Settlement Agreement promptly;
- Use our experience to ensure the final agreement reflects the best possible; outcome and settlement terms for your company
We can also assist with drafting a Settlement Agreement. This might typically include:
- Restrictions placed on the employee’s future activities and employment;
- The amount of financial compensation you will pay the employee;
- Assurances made by either party, regarding confidentiality and non-disparaging comments;
- The reference the employer will give;
- Details of what other employees will be told about the termination.
For expert advice on providing a Settlement Agreement to settle a workplace dispute, contact our Employment Law Team
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What is a Settlement Agreement?
A Settlement Agreement is a lengthy document which protects your business from a variety of workplace scenarios. These can range from preventing an employee from making negative comments about your company, to reaffirming their post-termination covenants.
To be a valid and binding waiver of claims, the employee must have independent advice on the terms and effect of signing the agreement. The employer will usually make a contribution towards this legal advice.
Once signed, a Settlement Agreement supersedes the employee’s contract of employment, so it is important to ensure you include any restrictions or terms that you want to apply in the future. There are usually confidentiality clauses included to prevent both parties from divulging the terms agreed.
The major benefit of using a Settlement Agreement is that the details around the employee’s termination can remain confidential. Once it has been signed, you have the assurance that your employee cannot bring any claims against you in a Tribunal or Court.
Can an employee refuse the terms of a Settlement Agreement?
Yes, your employee can choose to turn down a Settlement Agreement if they disagree with the terms around the termination of their contract, or if they feel the funds are insufficient.
The safest way to proceed with a Settlement Agreement is to ensure your employee feels that they are getting the best outcome from it. Try to ensure that they are provided with a range of other options, including a performance review or some sort of restructuring procedure.
Above all, try to avoid situations where your employee might say they were given no choice but to sign the Settlement Agreement.
What should you do if your employee requests a Settlement Agreement?
On occasion, the employee might be the one to suggest a Settlement Agreement, in the hope of a clean break. This would usually be because the professional relationship of trust and confidence has broken down beyond hope of repair. Perhaps a grievance was not upheld, or they are unhappy with a disciplinary penalty.
In this case, you will need to consider if a Settlement Agreement would benefit your business, but you do not need to accept it.
As experienced providers of clear, easy-to-understand Settlement Agreement legal advice, our team will be more than happy to discuss your requirements with you.
